On September 14, a tanker called the El Gaia tried to cross the Strait of Hormuz. It didn't make it. Iran's naval forces say it struck a mine in a "prohibited zone." A day earlier, a container ship near Hengam Island took a hit of its own — one crew member killed. Four ships crossed the strait that day. The day before, ten did.

Today is day 200 of the Iran war. Most people you know couldn't tell you that. There's been no formal ceasefire — despite a June memorandum of understanding that was supposed to buy sixty days of quiet — and fighting is now running on four fronts at once: Yemen, Lebanon, the Gulf, and the pipelines of Iraq and Saudi Arabia. On September 11, a drone launched from Iraq's Maysan province flew roughly 400 miles and hit Saudi Arabia's East-West pipeline, a line that normally moves four to five million barrels a day — somewhere between 4% and 5% of everything the world burns. No group claimed it. The people who track this for a living think Tehran gave the order.

Brent crude is trading above $107. WTI sits at $103.07. Six months ago, before any of this started, oil was trading in the low $70s. Think about that.

Here's what I find remarkable: none of it is the top story in Washington this week. The top story is what the Federal Reserve does tomorrow at 2 p.m. And the market's answer might surprise you. Traders are pricing a 92% probability that the Fed raises rates — not cuts them — for the first time in years. The 10-year Treasury yield hit 5.04% this morning, the highest level since 2007. The 30-year sits at 5.39%.

Most investors have spent three years training themselves to expect rate cuts. Now they're staring at a central bank about to tighten policy in the middle of an oil shock caused by an active shooting war. If that combination sounds familiar, it should — it's the same math that broke the 1970s. A supply shock drives prices up. The central bank raises rates to fight the inflation the shock created. Growth slows while prices keep climbing. Nobody wins that trade except the assets that don't depend on anybody's good judgment: gold, silver, hard commodities, energy itself.

Gold opened at $4,340.30 this morning and slid to $4,315.30 by mid-morning — down on the week, but still up more than 19% over the past year. Silver dropped below $64. Copper sits at $6.39 a pound. If you're reading the pullback in precious metals as a reason to get out, I'd urge you to reconsider. Rate-hike fear is exactly the kind of short-term noise that shakes weak hands loose right before the real move. The debt didn't get smaller overnight. The war didn't end. The barrels didn't come back online.

In other words: the market is currently pricing a world where an escalating war gets resolved quietly, a pipeline carrying 5% of global oil supply comes back online fast, and a Federal Reserve battling 5% long-bond yields can raise rates without breaking something. I don't think you get all three. I think you get, at most, one.

And one more thing worth sitting with: the last time 10-year yields were this high, in 2007, almost everyone was staring at housing. Nobody was staring at the actual fault line until it had already cracked. As a paid-up subscriber to this newsletter, you don't have that excuse. Plan accordingly.

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Four ships. That's how many tankers made it through the Strait of Hormuz on September 14 — down from ten the day before, and a small fraction of the traffic Hormuz would normally carry. Nobody has declared a blockade. Nothing needed to be declared. Captains are simply choosing not to go, because a container ship and a tanker were both hit by weapons or mines within 48 hours of each other.

Add the September 11 strike on Saudi Arabia's East-West pipeline — the line that moves four to five million barrels a day specifically so tankers don't have to run the Hormuz gauntlet — and you start to see the design. Whoever ordered that strike didn't just want to hurt Saudi Arabia. They wanted to remove the one alternative route that makes Hormuz less important. Riyadh shut the pipeline as a precaution and, at Iraq's request, has so far held off on retaliating. That restraint won't last forever.

Meanwhile, the Pentagon has gone quiet. CENTCOM hasn't announced a new U.S. strike in six days — the longest pause since fighting resumed on August 28 — and Iran hasn't fired a missile at an allied state in the same window. Two U.S. carrier strike groups, built around the George Washington and the George H.W. Bush, remain parked in the Arabian Sea alongside the Boxer Amphibious Ready Group and a rotating cast of destroyers.

Silence from both sides usually means one of two things: genuine de-escalation, or both sides reloading. Given that Houthi forces just seized the Hanish Islands and fired dozens of missiles and drones at Saudi Arabia's King Khalid Air Base in the same week, I know which one I'd bet on.

Oil remains firmly triple digits, and U.S. diesel prices are sitting at record highs. If you don't already own energy exposure, this is not the week to stay unhedged against a wider disruption.

China just proved a point it's been trying to make for three years: you don't need the best chips to build one of the best models — you just need the best price. On September 10, DeepSeek released V4.1-Flash, a 552-billion-parameter model with native image understanding, built for faster, cheaper inference than its predecessor. DeepSeek claims it beats Anthropic's Opus 5 and OpenAI's GPT-5.6 Sol on several coding benchmarks. I'd treat any lab's claims about beating its rivals with some skepticism. What I wouldn't dismiss is the price: DeepSeek cut its API rates back to pre-August levels the same week, and domestic chipmaker Cambricon had working support for the new model on day zero. Tencent is already wiring it into enterprise products.

Keep in mind what this means: three years of U.S. export controls on advanced chips were built on the theory that if China can't get the best hardware, it can't build the best models. Beijing's answer has been to build competitive models on inferior hardware and then give them away nearly for free — using price as the weapon Washington never restricted. DeepSeek's own domestic rivals, Moonshot's Kimi K3 and Z.AI's GLM-5.3, are getting squeezed by the same strategy. This is a knowledge race and a price war running at the same time, and the chip restrictions are doing less to slow either one down than their architects hoped.

Anthropic and OpenAI aren't standing still, but they aren't selling frontier intelligence at DeepSeek's prices, and they don't need to — for now. The real test comes if enterprise customers in Southeast Asia, the Gulf, and Latin America start defaulting to the cheaper Chinese stack simply because it's good enough and costs a fraction as much. That's not a hardware race anymore. That's a customer-acquisition race, and China is playing it the way it already played solar panels and electric vehicles: undercut on price until the rest of the world builds its infrastructure on your technology by default.

Mark September 24 on your calendar. That's when President Trump hosts Xi Jinping at the White House, timed to the UN General Assembly, to turn an eight-month tariff truce into something more permanent: a bilateral "Board of Trade" that will manage tariffs on non-sensitive goods between the two countries on a running, negotiated basis.

Here's what each side has already banked. China gets access to Nvidia's H200 chips, with a 15% cut of that revenue going to Washington, and has preserved its rare-earth leverage through a one-year pause on its harshest export controls — a pause on enhanced licensing for gallium, germanium, antimony, and graphite that runs through November 27. The U.S. has locked in $17 billion a year in Chinese agricultural purchases through 2028 and claims a 200-plane Boeing order, though how much of that gets verified is a separate question entirely.

Both governments are calling this a "confidence-building measure." Neither side has touched what actually matters: a $14 billion Taiwan arms package sitting on hold, the standoff at Scarborough Shoal, and Japan's expanded defense doctrine toward Taiwan. Those aren't resolved issues. They're loaded weapons still sitting on the table.

Markets have treated the summit as good news almost by default, because any handshake beats a trade war. But here's the thing: eight months of truce have produced exactly one durable structure — a chips-for-soybeans-and-planes swap — and zero movement on the issues that could actually trigger a crisis. If you're pricing Chinese-exposed equities as though this de-escalation is durable, you're betting that Taiwan, the South China Sea, and Japan's defense posture all stay quiet through year-end. That's a lot of geography to bet on staying calm at once.

Washington needs to borrow more than $2 trillion this year just to keep the lights on — and the bond market is done pretending that's fine. Interest payments alone are headed toward $1 trillion, a bill that now rivals the entire defense budget. Debt held by the public passed $31 trillion this spring, equal to more than 100% of GDP for the first time outside of wartime.

And the government has to keep issuing that debt into a market that just told every borrower on the planet rates aren't going back to normal anytime soon — a market also absorbing a flood of new corporate debt tied to AI infrastructure spending, and unwinding years of Japanese carry trades as the yen strengthens and Tokyo's own rates rise.

Most people assume that when a war creates uncertainty, investors flee to Treasurys. Not this time. Treasurys are one of the things investors are fleeing from — because a war-driven oil shock and a government spending machine that can't slow down are pushing in the same direction: higher yields, more expensive debt, tighter conditions for everyone else who has to borrow at the rate the Treasury sets.

This is where the story gets personal for anyone who isn't a hedge fund. Mortgage rates track the 10-year, not the Fed funds rate — so a 5% Treasury yield means expensive mortgages regardless of what the Fed announces tomorrow.

Corporate borrowers who loaded up on debt during the near-zero-rate years are about to refinance at multiples of their old rate. None of that shows up in the deficit or debt-to-GDP numbers directly, but it's the same root problem showing up in a different bank account: the cost of money has permanently reset higher, and Washington's spending habits haven't caught up to that reality yet.

In October 1973, Arab oil producers cut exports to punish the U.S. for supporting Israel in the Yom Kippur War. Oil quadrupled within months. The Federal Reserve, worried about inflation, raised rates into a slowing economy. The result was a decade nobody wants to relive — stagnant growth and high inflation running at the same time, a combination so unfamiliar that economists had to coin a new word for it: stagflation.

I'm not telling you history repeats exactly. It doesn't. But look at what's actually on the table right now, and tell me the shape isn't the same.

First, a war in the world's most important oil-producing region has taken four to five million barrels a day of capacity offline and cut tanker traffic through the world's most important chokepoint to a trickle in a single week.

Second, that supply shock has pushed oil above $100 and dragged long-term borrowing costs to levels not seen since 2007 — not because growth is booming, but because the market is demanding to be paid for risk it didn't have to price a year ago.

Third, a Federal Reserve that spent three years signaling rate cuts is now odds-on to raise rates instead, at the exact moment the war is escalating rather than resolving.

The comfortable read is that this is temporary — that the pipeline reopens, the strait clears, the Fed pauses, and by Thanksgiving nobody remembers day 200. Maybe. But Warren Buffett didn't build a fortune betting on the comfortable read.

He built it buying hard assets and quality businesses when everyone else was busy hoping a problem would resolve itself on its own. Gold and silver aren't expensive here. They're a market that hasn't yet decided whether to believe what's actually happening in the Gulf.

I urge you to decide before the market does. Own gold. Own energy. Keep duration short on anything you hold that pays a fixed rate, because a Treasury market yielding 5% on the 10-year has more room to hurt bondholders from here than to help them. Horse, meet water.

Markets are pricing a 92% chance of a 25-basis-point hike. If you see anything other than a hike, treat it as the real surprise — and expect gold and long bonds to move hard in opposite directions within minutes of the announcement.

Watch whether the "Board of Trade" framework produces anything concrete on tariffs, or whether it's a photo opportunity wrapped around a truce that already existed. If you want an early tell, watch whether Taiwan arms sales get mentioned at all.

Four ships in a day is not sustainable for global oil markets. If transit volume doesn't recover meaningfully over the next week or two, expect Brent to test $115 or higher regardless of what the Fed does tomorrow.

China's pause on enhanced licensing for gallium, germanium, antimony, and graphite expires that day. Whether Beijing extends it will tell you more about the real state of the truce than anything said at the September 24 summit.

Watch $4,300 on gold and $60 on silver. If those levels hold through the Fed decision, this pullback was noise. If they break, the market is genuinely repricing for higher-for-longer rates — and that's a different, more painful trade.